Wired's look at how Google sells and prices ads

Most policymakers are pretty familiar with how TV stations, magazines and newspapers sell advertising. Typically those organizations have a "rate card" with standard ad prices for a 30 second ad or a full-page print ad, and the advertiser pays the standard rate or negotiates a lower rate if they commit to buy ad space in bulk.

That's not how ad space on Google is sold. Instead, all advertisers -- big and small -- bid for their ads to appear when users search on Google for certain terms.

Admittedly Google's ad auction can be a bit difficult to understand because it differs so much from traditional ad models. That's why we have posted videos and tutorials on the AdWords Learning Center explaining how it works.

Now Wired Magazine's Steven Levy has a new article out in the June issue taking an even closer look ad the Google ad auction, and it's a must-read for policymakers who want to understand online advertising. Levy looks at how Google's auction model evolved, the role of algorithmic "quality scores" that ensure users see relevant ads, and how the "second price" auction means that advertisers don't overbid.

Check it out when you get a chance.

Graphic: Wired.com